Homebuyers appear to be adjusting to higher property purchase costs after the latest Nationwide House Price Index revealed a slowdown in house price growth.
Annual house price growth slowed in April to 3.4% from 3.9% in March and also fell on a monthly basis by 0.6%, data from Nationwide shows.
This puts average UK house prices at £270,752.
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It follows a boost to the property market at the start of the year due to a rush to complete deals before stamp duty thresholds dropped.
Stamp duty relief for first-time buyers dropped from £425,000 to £300,000 and fell from £250,000 to £125,000 for home movers, pushing up the cost of buying a property.
HMRC estimates released today suggest there were 177,370 property sales registered with the taxman in March on a seasonally-adjusted basis – up 104% annually.
However, price growth now appears to have been slowing, leaving many analysts wondering if the market is now set for a slowdown as buyers adapt to higher stamp duty costs.
‘A softening of house prices’
Stamp duty holidays are often followed by a slowdown in the market so this dip in house price growth was expected by some.
Robert Gardner, Nationwide’s chief economist, said: “The softening in house price growth was to be expected, given the changes to stamp duty at the start of the month. Early indications suggest there was a significant jump in transactions in March, with buyers bringing forward their purchases to avoid additional tax obligations.
“The market is likely to remain a little soft in the coming months, following the pattern typically observed following the end of stamp duty holidays.”
But the changes also coincide with the typically busier spring and summer home selling season where the longer days often attract more viewings.
Buyer demand could also be boosted by the prospect of further interest rate cuts.
Gardner added: “Activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential home buyers in the UK remain supportive.
“Unemployment remains low, earnings are rising at a healthy pace in real terms, household balance sheets are strong and borrowing costs are likely to moderate a little if the bank rate is lowered further in the coming quarters as we and most other analysts expect. Indeed, swap rates have moderated in recent weeks.”
Is now a good time to buy a property?
Higher stamp duty costs do already appear to have hit buyer demand.
The latest Zoopla House Price Index showed demand was up just 1% annually in April, while supply rose 12%.
It seems that affordability remains an issue but this could change if interest rates are cut next week.
Jonathan Handford, managing director at national estate agent group Fine & Country, said: “There is growing speculation that cuts could come as soon as May. That outlook is being shaped not only by domestic inflation data but also by global headwinds — including the potential disruption caused by changes to global trade. However, this could also prompt UK policymakers to act faster to support growth and ease lending conditions.
“Even so, challenges persist. In many high-cost areas, house prices remain out of reach for a significant share of aspiring buyers. Stricter lending rules and large deposit requirements continue to shut many out of the market, despite signs that broader financial conditions may improve.
“April’s slowdown reflects a natural rebalancing after a period of deadline-driven demand. But with inflation softening and rate cuts increasingly likely, the market could regain momentum later this year, provided affordability barriers are addressed.”
Holly Tomlinson, financial planner at Quilter, highlights that mortgage rates remain elevated, which is compounded by the higher stamp duty costs.
She said: “The figures suggest a market that is fragile. Any meaningful pick-up in activity is likely to depend on a more material fall in mortgage rates or an improvement in real incomes. Until then, the housing market looks set to continue treading water.”
When it comes to house prices, Zoopla is expecting growth to slow further to 1-1.5% over the coming months as demand cools and supply expands.
Others are more optimistic. Estate agency brand Knight Frank has forecast 2.5% growth by the end of the year, while Savills has predicted 4%.
